SEN. KERRY: (In progress) -- to be here this morning with my colleague Senator Lugar to look at another country that has an enormous importance in its relationship with the United States and with the rest of the world.

Regrettably, in recent years America's relationship with Russia has arguably reached the lowest and least productive phase in two decades. President Obama has spoken, importantly, of the need to "reset" U.S.-Russia relations, and we agree wholeheartedly. While it is not yet clear exactly what this new chapter in our relations can bring, it is clear that our common interests demand that we try to work together more constructively.

Our differences are real, but so too is our potential to cooperate and particularly to lead together on important global challenges. From Iran's nuclear program to human rights in Burma to our presence in Afghanistan, there is scarcely an issue of global importance which could not benefit from greater cooperation and participation from Russia. Our challenge is to ensure that to the extent possible we enlist Russia to act not just as a great power individually but as a global partner with us and with our European allies.

This hearing will explore what we can hope to accomplish through engagement; what motivates Russia at this moment in time, if that's different from other moments; how we can best respond to our continued disagreements; and how we can achieve greater cooperation on the issues where our interests clearly converge.

Nowhere is our shared challenge greater or shared leadership more vital than in confronting the threat posed by nuclear weapons and nuclear terrorism. Yesterday we celebrated on the Senate floor the 12,000th vote of my colleague Senator Lugar, which is a milestone. I think he was telling us it places him -- is it 13th or 15?

SEN. RICHARD G. LUGAR (R-IN): Thirteenth.

SEN. KERRY: Thirteenth in the record number of votes cast, and he is the senior Republican in the United States Senate. And obviously Senator Lugar has been a leader in this field. And together with Sam Nunn he sounded the alarm early on that Russia's unsecured nuclear materials posed a major threat. The Nunn-Lugar initiative was the start of a visionary effort to dismantle excess weapons and secure dangerous materials. It sparked long-term cooperation with Russia that has paid major dividends for national and international security alike. We need more of that kind of vision now to rebuild relations with Russia, and we actually need to continue to see that task to its completion.

Russia and the United States ushered in the nuclear age together, and now together America and Russia bear a special responsibility to dramatically reduce our arsenals. We have to make a serious joint effort to move the world in the direction of zero nuclear weapons, with recognition that, while the ultimate goal remains distant and complicated, every prudent step that we take to move in that direction makes us safer.

In fact, America and Russia can accomplish a great deal together on arms control right now. We need to reach agreement on a legally- binding successor to the START treaty, and President Obama has committed to pursuing these negotiations with the intensity that they deserve. With START set to expire in December, we need to make it a priority to strike a deal -- or at least construct a bridge -- before we lose the verification regime that has been vital to maintaining each country's understanding of the other's nuclear force posture.

I am convinced that we can go well below the levels established by the Moscow Treaty. Personally -- I think personally we should set a near-term goal of no more than 1,000 operationally deployed warheads, and I'm confident that this can be done in a way that increases our national security rather than diminishes it. Obviously we have to pursue such a goal in close consultation with our allies and our military, but that level, in my view, is more than enough to deter aggression.

Vital to our efforts toward a nuclear-free world is a greater effort from Russia to prevent a nuclear-armed Iran. The president is right to open the door to direct engagement with Iran. But it's imperative that we back a strategy of engagement with a commitment to more effective multilateral sanctions if negotiations prove incapable of bringing progress. To do this effectively, we need Russia to be part of that process.

We must also think carefully about missile defense. I have serious reservations regarding the rapid deployment of a largely untested missile defense system in Poland and the Czech Republic, and I intend for this committee to examine that policy closely. Many Russian leaders see these missile defense sites as somehow directed at Russia -- at them. In fact, they are not. But Russia can minimize our need for missile defense in Europe by helping to convince Iran to change its nuclear and missile policies. And both Russia and the United States can put more effort into jointly developing an effective defense against medium- and intermediate-range missiles.

Our former colleagues in the Senate, Gary Hart and Chuck Hagel, are the coauthors of an insightful new report from the Commission on U.S. Policy Towards Russia that explores in depth many of these same avenues for greater cooperation. This report warrants serious consideration as we look for the way forward with Russia.

Of course, we are going to continue to have some differences. Russia's neighbors have a right to choose their own destinies, and America and the world community will continue their support for sovereignty and for self-determination. Georgia has a right to its territorial integrity. I visited Georgia just last December, and I shared the concern of many over the failure to fully implement the cease fire agreement, as well as the continued lack of access for international monitors in South Ossetia and Abkhazia. Russia -- in my judgment -- was wrong to manipulate the flow of energy to Ukraine for political purposes, and we should support Ukraine's democratically elected government. We also have genuine concerns about Russia's troubling backsliding on democracy, human rights and the rule of law.

As we consider the prospects for a new era in relations, we need to understand the dynamics that are at work in Russia.

This includes Russia's politics and its economy, particularly the impact of the steep drop in the price of oil, the decline in Russia's foreign exchange reserves, and the 67 percent decline in Russia's stock market. I'm eager to hear the witnesses' thoughts on how those events are going to affect Russian foreign policy and our prospects for better engagement.

Constructive relations and greater mutual confidence with Russia are undoubtedly a challenge, but the mutual benefits of doing this are clear, and they are compelling. In the twentieth century America and the Soviet Union expended unbelievable levels of resources, incalculable resources, and we expended them on our rivalry. The days when Moscow stood on the opposite side of our every single global crisis have passed. Now we need to enlist Moscow to be on the same side whenever possible in meeting the challenges of this new century.

We have three distinguished panelists today. Stephen Sestanovich negotiated directly with the Kremlin as ambassador-at-large and adviser to the secretary of State during the Clinton administration. Andrew Kuchins, director of the Russia and Eurasia Program at CSIS, is the author of an interesting and timely report entitled "Pressing the Reset Button on U.S.-Russian Relations." And Ariel Cohen is a senior research fellow at the Heritage Foundation. And we look forward to the testimony of each of you. Thank you for being with us today.

SEN. LUGAR: Well, I join you, Mr. Chairman, in welcoming our distinguished witnesses. It's good to see each one of you here.

Russia represents significant challenges as well as opportunities for the Obama administration. Moscow is at the intersection of many of the most important foreign policy issues facing the United States. We have common interests on a number of economic and security issues, including arms control, nonproliferation, antiterrorism and global economic recovery. Russia is experiencing severe pain from the global economic downturn that would seem to increase incentives to cooperate on a range of issues. The ruble has plunged 50 percent against the dollar, the Moscow stock market has dropped as much as 80 percent at various points, amidst a collapse in oil prices.

Although these economic conditions and common interests may create openings, we should be realistic in assessing the prospects for cooperation. Negotiating with Russia will be a far more complex and difficult proposition than simply appealing for a new relationship. Russian actions related to Iran, Afghanistan, North Korea, for example, have exhibited a reflexive resistance to United States positions even when we have substantial commonality of interest. Russia's repeated use of energy exports as a political weapon and its treatment of Ukraine and Georgia demonstrate an aggressiveness that has made comprehensive negotiations on regional problems impractical.

In this context, we should avoid ratcheting between excessive expectations and severe disappointment. Rather, we should recognize that U.S.-Russian relations are likely to be strained for some time. We should consider carefully what initiatives can be advanced in such an environment.

Our most time-sensitive agenda item with Russia is the preservation of the START Treaty. On December 5 the verification regime that undergirds the START Treaty will expire. The Moscow Treaty, which reduces deployed warheads to 1,700, would also be a casualty because it utilizes the START process. In other words, the foundation of the U.S.-Russian strategic relationship is at risk of collapsing in less than nine months.

The Bush administration made little progress on this issue prior to its departure. I know that President Obama and Vice President Biden understand the urgency of the problem. However, everyone involved should recognize that we are dealing with a timeline that leaves little room for error or delay.

I support efforts to negotiate lower U.S. and Russian nuclear weapons levels; to reduce Russia's tactical nuclear weapons stockpile; to cooperate on missile defense; and solve the conventional weapons stalemate. But with the December 5th deadline looming, we should carefully set priorities. Solidifying the START verification regime must be the primary focus. Both sides would benefit from a legally binding solution in which the common commitment to the START and Moscow Treaties is retained. Reaching common ground on START would provide a foundation for continuing United States-Russian cooperation on reducing the nuclear, chemical and biological dangers facing the world.

Next year, nearly every nation will participate in a Review Conference on the Nuclear Non-Proliferation Treaty. The NPT is under stress from the actions of Iran and North Korea and the concerns of neighboring countries. The Treaty is also contending with the complications that arise out of an expansion of global interest in nuclear power. The national security of both Russia and the United States will suffer if the world experiences a breakdown of the nonproliferation regime. Before the Review Conference, Moscow and Washington should strive to achieve bilateral arms control progress as well as strengthen cooperation on nonproliferation issues.

One important element of such cooperation is the establishment of an international nuclear fuel bank. A nuclear fuel bank would help keep nuclear power safe, prevent proliferation and solve energy problems by providing nuclear fuel and fuel services at reasonable prices to those countries that forego enrichment and reprocessing. Unless the United States and Russia provide strong leadership in this area, the coming surge in demand for nuclear power will lead more and more nations to seek their own enrichment facilities, and that would pose an unacceptable risk to the security of both Russia and the United States. If non-nuclear weapons states opt for major nuclear power programs and their own fuel-making capabilities, they would produce enough nuclear material for tens of thousands of nuclear weapons every year. This could generate a raft of new nuclear weapons states, exponentially increase the threat of nuclear terrorism and provoke highly destabilizing arms races.

The Obama administration must plan and carry out a realistic strategy that promotes United States interests while engaging with Russia in areas where we have common objectives. I look forward to the insights of our witnesses on the prospects for engagement with Russia and the priorities that we should be pursuing.

And I thank the chair, and -- very well. I'm advised that the chair would like for me to recognize Steve Sestanovich as our opening witness, and I so do.

MR. SESTANOVICH: Thank you very much, Senator Lugar, other members --

MR. : (Off mike.)

MR. SESTANOVICH: Thank you very much, Senator Lugar, other members of the committee. I appreciate the opportunity to discuss an American policy toward Russia with you at this very timely hearing. I have prepared somewhat fuller remarks that I hope can be entered into the record.

SEN. LUGAR: They will be entered in the record in full.

MR. SESTANOVICH: Of all the world's major states, Russia is the only one whose relations with the United States have deteriorated in the past five years. The worsening of relations -- of Russian- American relations has involved real clashes of policy and perspective and angry rhetoric on both sides.

Against this backdrop, the Obama administration's aim to reset -- press the reset button -- we're going to hear a lot about that tired metaphor -- is welcome and needed. Now, the question is, are we talking about a smooth process of improvement or a contentious one. There are some reasons to hope that, despite years of testiness, the resetting of relations between Russia -- between Moscow and Washington can be a relatively smooth process.

Leaders and policymakers in both countries seem, in general terms, to want more productive relations. They regularly speak, as you have, Senator, of a number of common interests -- from nuclear nonproliferation to counterterrorism to stable international energy markets -- that ought to make it possible for Russia and the United States to cooperate. Today, not surprisingly, economic growth and recovery should be added to this list. As Senator Kerry noted, no problem ranks higher on the to-do list in both Moscow and Washington.

If President Obama and President Medvedev want to show that Russian-American relations are rebooting nicely, it will be easy for them to do so when they meet on the margins of the G-20 summit in London in two weeks. They should at that time be able to announce the prompt opening of talks on the extension of the START I Treaty -- or, even better, on a successor agreement that further reduces strategic arsenals. They could also recommit themselves to practical measures to discourage Iran from acquiring nuclear weapons, including diplomatic and military cooperation and -- if the threat requires -- missile defense.

They might further renew their determination to support a successful counterinsurgency effort in Afghanistan, and encourage other states to join them. They can announce an agenda of steps to address the concerns of both sides on issues of European security, including strengthening the OSCE, reviving the CFE Treaty, and consultations on Russia's proposals to enhance Europe's "security architecture."

This is a very substantial but hardly exhaustive list. It's not difficult to spell out comparable measures in other areas, whether it's trade and investment, energy cooperation, climate change or the work of the NATO-Russia Council.

Members of Congress, I might add, can do their part to support the two presidents. As you noted, Mr. Chairman, the Congress has been a source of leadership in this area in the past, especially in the Visionary Threat Reduction Initiative sponsored by Senators Nunn and Lugar.

Congress can, for one thing, indicate its reference -- readiness to graduate Russia and other states of the former Soviet Union from the provisions of the Jackson-Vanik amendment as soon as possible and without further conditions. Congress can also make clear that it is ready to support the so-called "123" agreement on civil nuclear cooperation that the Bush administration sent up to the Hill last summer, only to withdraw it when Russia invaded Georgia.

Mr. Chairman, the steps I have described for improving Russian- American relations would amount to a textbook reset. But what if the process isn't so smooth? Perhaps, instead of merely switching things off and starting over, we have to inquire into the relationship's deeper underlying problems. Some thoughtful observers argue that we need to pay closer attention to the way in which Russia defines its interests, and I completely agree.

Moscow's actions and statements over the past several months have given us a feel for its thinking and suggested its approach to security may actually complicate the rebooting of Russian-American relations.

Consider, for example, the criticism of President Obama's suggestion that if the problem posed by Iranian nuclear and missile programs went away, so too would the need for American radars and interceptors to counter them. Or consider the fact that for four years Russian policy has called for the curtailment of Western access to Central Asian airfields to transport men and material to Afghanistan, despite the negative impact this would have on our counterinsurgency campaign in that country.

Other Russian policies demonstrate the same approach to security. We see it in the regularly repeated demand that Ukraine give up ownership of gas pipelines on its territory. It shows up in the suggestion that Europe needs new security institutions to limit NATO's ability to carry out the agreed policies of its members.

What ties all these policies together -- from missile defense to energy to Afghanistan -- is a seeming conviction that Russian interests and those of other states, especially the U.S. and its European allies, are inevitably in conflict.

Russian security continues to be viewed in unusually prickly zero-sum terms. The result is that real cooperation with other states is often considered risky and undesirable, even dangerous. This Russian outlook does not mean that a new American approach cannot succeed, and it certainly does not mean that we should not make the effort. Our interests -- as both Senator Kerry and Senator Lugar have noted -- our interest in expanded cooperation with Russia is real, and it calls for sustained diplomacy to create a more productive relationship.

Yet the mismatch between our strategic outlook and Russia's does have implications for the way we think about this effort. Our goal is not simply the mundane mutual accommodation of interests that our diplomats pursue on a daily basis with other states. Alone among the great powers, Russia presents us with the challenge of trying to get it to conceive its interests in a fundamentally different, less confrontational way. Expanded cooperation with Russia is possible even within its current conception of its interests, but far more would be possible if its leaders viewed security in ways more congruent with the outlook of other European states.

Is such a transformation possible? Of course. Nothing is more contrary to historical experience -- or for that matter insulting to Russia -- than to suggest that it alone among the world's major states must remain permanently hostage to outdated, counterproductive conceptions of its interests, goals and identity.

American policy, then, should pursue practical opportunities for cooperation with Russia. That means advancing its interests into multilateral institutions of international life where it's ready to contribute to them. Right now, Russia's accession to the World Trade Organization is the most important unexploited opportunity. We should do better in expanding bilateral cooperation as well. Here, as senators have noted, arms limitation talks offer significant possibilities. And we should not miss openings to address the connection between the country's internal transformation and its place in the world. On this point, there is no more tantalizing invitation than President Medvedev's observation that whether Russia enjoys respect abroad depends on whether it observes the rule of law at home.

In pursuing these cooperative steps, we should not forget the larger goal of our engagement with Russia -- a relationship not limited to refighting battles of the last decade or the last century. That reset button remains to be pushed.

Thank you, Mr. Chairman.

SEN. KERRY: Thank you very much, Mr. Sestanovich. Appreciate it.

Mr. Cohen, are you going to be next?

If I could ask you also, the next two witnesses, to do as Mr. Sestanovich did, a good summary like that, your full testimonies will be placed in the record as if stated in full, but that'll give the committee more time to engage, and we appreciate it.

Mr. Cohen?

MR. COHEN: Thank you, Mr. Chairman, Senator Lugar. You've contributed so much for the improvement of U.S.-Russian relations. Unfortunately, they're not in best shape today. Thank you, Senators. I am delighted to be here and will request that my full remarks will be entered into the record. I would also ask to append a forthcoming report coming out this week that The Heritage Foundation is publishing: "Russia and Eurasia: A Realistic Policy Agenda for the Obama Administration."

President Obama expressed a desire to constructively engage Russia, and these concerns, of course, are valid. However, when we are looking at Russia's behavior over the last several years, especially with regards to its neighbors, and the rhetoric that, frankly, is quite disconcerting with regards to the revision of the global security and economic architecture, questions arise what Russia is really trying to accomplish.

Russia's opposition to missile defense in Central Europe -- only 10 interceptors; Russia's efforts, together with China, to push U.S. bases out of Central Asia -- 2005 they accomplished our eviction from the K2 base in Uzbekistan, and this year the announcement about the Manas base in Kyrgyzstan. Russia is using European increased dependence on gas -- natural gas -- and energy in general as a political tool. It's not just Ukraine, Mr. Chairman, it's also a country as significant as Germany.

After the Georgian war, Russia does not respect the terms of the Medvedev-Sarkozy agreement and is planting five bases -- military bases -- in Abkhazia in South Ossetia -- three in Abkhazia -- the naval base in Ochamchire; the Bombora air base near Gudauta; an alpine Special Forces base in the Kodori Gorge; and two bases in South Ossetia.

NATO's desire to cooperate with Russia on bringing under control the Iranian nuclear program is understandable. However, Russia not only supplied a civilian reactor to Iran -- the Bushehr reactor -- it also trained hundreds of scientists and engineers from Russia to work in dual-use technology fields, both nuclear and ballistic missiles. Russia has multibillion dollar interests in Iran and is using Iran as a battering ram for its interests in the Middle East.

The relationship between Russia and Iran is strong, and unless the great bargain is really achieved between our countries -- and when I'm talking about the great bargain, I would caution that giving up the missile defense in Europe is probably a price too high to pay to enact it, but overall I am pessimistic in looking at the chances of achieving Russia's disengagement from Iran or getting Russia on our side.

So if we are looking at the complexity of Russian foreign policy -- including the renewed patrols of Russian strategic bombers along the Atlantic and Arctic coastlines and into the Caribbean -- when we are hearing the announcement that Russia may renew its basing for the strategic bombers in Venezuela and Cuba, the question arises, what can we accomplish? Looking internally in Russia, what President Medvedev himself called legal nihilism is dangerous for the flow of investment -- both foreign and domestic, for protection of property rights and for defense of human rights.

The notorious cases of murder of journalists such as Anna Politkovskaya -- a murder in which two of the accused coconspirators were acquitted by a Russian court, by a jury -- the murder in which the people who ordered the murder -- the killing -- and the triggermen were not even put on trial -- the killing of a human rights attorney, Markelov, and the list is long.

One of the more media-exposed cases is the case of the two YUKOS trials. The YUKOS company was raided and dismantled by the law enforcement in 2003, 2004. Its assets were auctioned off at prices under the going market prices. And today the second trial, in which the partners in YUKOS, Khodorkovsky and Lebedev, are facing very long sentences that effectively may be the life sentences, whereas justice is not applied equally to other oligarchs who may have been involved in alleged crimes as bad or worse than these two.

So the Obama administration is facing tough policy changes. What can it do? It can certainly explore the ways to cooperate with Russia on Afghanistan. The threat of the Taliban is significant for Russia's allies in Central Asia. Taliban was the only country that recognized the secessionist Chechen regime in Chechnya. Russia would benefit from cooperation with NATO on Afghanistan, and Russia would benefit in cooperation with us to prevent Iran from becoming a nuclear power on its borders.

However, on some of other issues that were mentioned here, such as the "123" agreement, we need reciprocity from Russia. We need to stop Russian cooperation on Iran. We would like to see adequate liability protection for U.S. companies doing business in Russia, and a provision of two-way market access to American companies in the Russian nuclear market.

The Obama administration should communicate in the current negotiations that Russia's close ties with Venezuela, Cuba, Iran and even Hamas and Hezbollah, are counterproductive. Russian embrace of Iran and Syria -- I did not mention that Russia is planning to put two naval bases in Syria, is considering a return to an anchorage in Libya, and is considering replanting its base as it used to have during the Cold War, at the Suqatra Island near the entrance to the strategic Bab-el-Mandeb straits between the Red Sea and the Indian Ocean.

So when we're talking about pushing the reset button, we have to undertake a full assessment of our goals vis-a-vis Russia and formulate the policy, just as in the nuclear field we need to undertake the reassessment of our nuclear policy and targets. Unfortunately, this reassessment was not taken before the rhetoric about pushing the reset button began.

Furthermore, we need to make clear to Russia that a new military adventure against Georgia will not be tolerated. We need to boost our presence in the Arctic, because the Russians are talking about territorial claims in the Arctic the size of almost all of Western Europe, and the Arctic is very rich with hydrocarbons and strategic mineral reserves.

To conclude, Russia is and will remain one of the most significant foreign policy challenges for the Obama administration for years to come. Despite the recent toned-down rhetoric stemming from the economic downturn -- and the economic downturn in Russia, relatively speaking, is worse than here -- there are rumblings in the Russian military now that the Medvedev-Putin administration is trying to calm down by talking about a massive bailout, a rearmament package that'll kick in in 2011, but the global -- the importance of Russian policy in the global Obama agenda needs to be high, and it needs to be given a lot of attention. Unfortunately, the key officials to deal with that have not been nominated yet.

Lastly, we should not forego a core American foreign policy objective with regards to Russia, promoting democracy, good governance, transparency and the rule of law. History has shown that the most dangerous times are ones when new powers -- or in this case a resurgent one -- is attempting to challenge the status quo. The United States and our allies must remain vigilant and willing to defend freedom and prevent Russia from engendering shifts in the global power structures detrimental to our national security interest.

Thank you.

SEN. KERRY: Thank you very much, sir.

Mr. Kuchins?

MR. KUCHINS: Mr. Chairman, Senator Lugar, members of the committee, thank you very much for the opportunity to share a few thoughts with you this morning about Russia and the prospects for engagement, or pressing this so-called reset button.

I suppose I'm somewhat a bit more optimistic than Ariel on this. But the analogy, certainly, of a reset button is not perfect. There is an awful lot of toxic waste under the bridge in the U.S.-Russian relationship. There's no way that we can simply clear this up by overnight, and some of the legacies of the past are not going to go immediately.

But if the sentiment simply implies that there is an opportunity for the Obama administration to improve relations with Russia, that's one which I heartily agree with, and I want to spend a few minutes arguing more broadly as to why I think that's the case, rather than focusing on specific issues. I've made lots of recommendations in a couple of recently published reports, one of which you referred to.

Now, a good part of the rationale that there is an opportunity here is simply that relations had reached such a low point in the wake of the Georgia war in the fall that there was only virtually one direction to go in, and that was up, unless we wanted a new Cold War or perhaps something worse with the Russians. I've also sensed here in Washington over the course of the last six months the emergence of a broadening consensus in the middle of our political spectrum about the need, the importance of having a more constructive relationship with the Russians, and I think the report that you referred to by your former colleagues, Senators Hart and Hagel, is an example of that.

But more fundamentally, the global situation has changed quite drastically in the last year, and I think in ways that have altered the calculations of our friends in the Kremlin. Russia had been on an extraordinary economic roll for the past decade that saw its GDP grow by a factor of more than eight in less than 10 years. Simultaneously they had perceived U.S. power in the world as ebbing. They saw us in difficult military engagements in Iraq and Afghanistan, and then more recently they saw our economy begin to flounder with the subprime mortgage crisis, which foreshadowed the global economic -- global financial crisis.

I think for the last several years -- the five years or so particularly which Steve mentioned -- the worsening deterioration of U.S.-Russia relations, the Russians have overestimated their strength, and they have overestimated our weaknesses. But their hubris, I think, has been rocked as the crisis has hit them extraordinarily hard, revealing their vulnerabilities as well as deep integration into the global economy.

Now, Russia is notoriously difficult to comprehend, as many famous observers far smarter than I have noted over the years.

My favorite line about Russia comes from Will Rogers. "Russia is the only country about which no matter what you say about it, it's true." My argument today is that maybe Russia is not so mysterious to understand, and that it's really its economic circumstances as well as its articulated goals that hold the answer about this question "Whither Russia?"

2008 was the most contentious year in Russian-Western relations since the collapse of the Soviet Union. Yet while these political relations have continued to worsen, economic integration between Russia and the West continued to deepen and to widen as trade and investment volumes reached all-time highs.

In the summer of 2008 the Russian government published a long report detailing Russia's economic goals to the year 2020. The most striking finding for me in this report is that Europe especially, but the West more broadly, would be far and away the most important partners for Russia to achieve their best-case growth scenarios in the coming 12 years. And it seemed that the current trends -- and this goes back to before the Georgia war -- the current trends of deepening economic integration on the one hand and worsening political relations on the other hand between Russia and the West were contradictory and not sustainable.

Now, Mr. Medvedev was inaugurated as Russian president back in May. A couple of weeks later the Russian stock market hit its all- time high. A couple of weeks after that oil price went up to $147 a barrel. The Russian government had more money than it knew what to do with. And the report on Russia's strategic economic goals to 2020 called for similar growth levels that would ultimately make Russia the fifth largest economy in the world and the largest in Europe. Our friends in the Kremlin were talking about themselves as a "safe haven" or an "island of stability" in the widening economic crisis.

But how quickly things have changed, and both Senator Kerry and Lugar pointed to a number of these data points about the impact of the economic crisis on Russia. I would only add to that that most prognoses for economic performance in 2009 predict negative growth, and because of the expected -- because of the ruble devaluation which has taken place and possible ruble devaluation in the future, the nominal dollar GDP of Russia is likely to drop 20 to 25 percent after averaging more than 25 percent growth for the last nine years. And the Moscow-based investment bank Troika Dialog, which actually is one of the most -- one of the more optimistic prognostications about the Russian economy -- had the numbers for the Russian economy coming in last year -- 2008 -- at almost $1.7 trillion, and the prediction for next year is $1.25 trillion. Now, this is quite a reversal of fortune.

The Russian government is looking at deficits of 5 to 10 percent in 2009 and possibly deficits in 2010 and '11, and we've seen the growing impact of the crisis on the Russian real economy. Now, all national economies are trying -- are struggling to adjust to the deepest global slump in several generations, but the drastic change in momentum for policymakers in Moscow is especially stark and challenging. Since so many millions of Russians have benefited from the economic prosperity of the last decade, the impact of the current crisis affects a far greater percentage of the population than the last economic crisis back in 1998. And I think in the coming months and possibly more than a year ahead, Mr. Putin's vaunted "vertical of power" will be tested as never before.

Now, it's important for us to think about -- carefully about what are the foreign policy implications of this extraordinary economic whiplash. The crisis should have a major impact on Russia's external behavior, and therefore U.S. interests. Now, as of this writing, as of this moment, many analysts have concluded, as Dmitri Simes did back in December, that "In Russia, hard times normally produce hard lines." I don't think that the historical record actually supports that that's the case, and I think that history provides more evidence that economic downturns in Russia have often -- have corresponded with periods of greater cooperation.

Economic stagnation in the late 1980s was associated with the end of the Cold War, and the contraction of the 1990s correlated with an accommodating foreign policy under Boris Yeltsin. Since the first oil crisis back in the early 1970s, there has been a powerful correlation, I would argue, between a high oil price environment and a more assertive and aggressive Russian foreign policy. And this dynamic corresponds to the late Brezhnev years and to the Putin period, especially since 2003-2004.

Now, nothing is predetermined, and -- but this historical perspective suggests that the current economic downturn could push Russia towards a more cooperative stance vis-a-vis the West, including the United States, especially in terms of economic cooperation. Just nine months ago, with an oil price so high, the Russians had very little incentive to cooperate and engage economically with us. Russia was such an attractive market that it did not need to make any effort to lure Western investors. Money flowed into its markets regardless of its policies. Its economy grew at a rapid clip despite the stagnation of the structural economic reform agenda, and it no longer needed financing from international institutions to ensure fiscal health. In short, Russia's boom provided little incentive to reach out to the West.

Today that situation is quite different. I think there are also implications of this for Russia's domestic, economic and political policies. I think evidence also supports that since the first oil crisis back in 1973, periods of low international oil prices and/or economic downturns in Russia correlate with greater incentives for structural economic reform, and those usually correspond with greater degrees of political pluralization.

It was the crash of the oil price back in 1986 that took place shortly after Mikhail Gorbachev assumed leadership, and this dramatic drop in hydrocarbon revenues starkly revealed all the structural deficiencies of the Soviet economy. The rapidly eroding balance sheet clearly made imperative of reform much more urgent. It's hard to imagine that Mr. Gorbachev would have embarked on such a radical set of reforms absent this impending sense of economic crisis.

So at least in the short term, or for however long this economic downturn lasts, the Russians are going to feel far more economically constrained than recently. And even when global demand begins to recover, the Russians are going to be competing for investment with all economies whose assets have dramatically declined in value, as opposed to 10 years ago, where Russia was more unique as a large emerging market with undervalued assets.

There's another major difference that Russia faces today with its recovery than 11 years ago, and that is that for the near and midterm, the prospects for production growth of both oil and gas resources are rather grim. Particularly in the oil sector after the financial crash in 1998, Russian oil companies -- led by YUKOS and Mr. Khodorkovsky at the time -- achieved remarkably rapid growth in production with application of modern technologies to the old Soviet wells in Western Siberia. That feat cannot be repeated again today, and future production will have to come from new greenfields in geologically and climatically challenging conditions that could be the most expensive and complicated projects in history, and they can't do it alone.

I think as commodity prices have fallen sharply, I think it's clear to our leaders in the Kremlin that the status quo is not a viable option. Russia cannot continue to depend to such an extent on its resource wealth, which is vulnerable to the cycles of booms and busts. They know it, but doing something about it is a bit more complicated.

Now, to conclude here, my view since the Soviet Union collapsed has been and remains that in the long term Russia's strategic economic and security interests lie in closer partnership with the West -- not necessarily to the exclusion of its partnerships and relations with other key countries like China, India and Iran and others. But historically, culturally, economically, demographically, Russia has always leaned to the West, and its roots are as a European great power.

And a particularly telling data point from the Russia 2020 strategy supports this conclusion. Even in the best case scenario, what they call the innovation scenario of growth to 2020, which calls for an average of 7 percent growth to that year, Russia's share of global GDP would rise from only 2.5 percent today to a bit less than 4 percent in 2020. My conclusion from this fact is that Russia will not have the financial or human resources to wage any kind of new cold war and contest U.S. power around the globe as it did for most of the second half of the last century. And it was Russia's excessive -- the Soviet Union's excessive militarization of its economy and society to support its overarching global confrontation with the U.S. that was a major cause of its collapse, and this lesson is not lost on current Russian leaders.

Why have we failed to establish a firmer partnership with Russia over the past generation? Well, there's lots of fault to go around. But I think one factor that we should keep in mind is that, while many observers have been quick to refer to Mr. Putin's Russia as neo- imperial in its policies, I think fundamentally what the Russians are still dealing with is the collapse of empire and a post-imperial syndrome. The Soviet Union was the last empire to collapse, and, like many empires before them, it will take more than one generation for Russia to fully adapt to its post-imperial status. As then Deputy Secretary of State Strobe Talbott said back in the 1990s, we need to have strategic patience with Russia.

The other thing I would point to is that Russia's heavy dependence on energy exports also contributes to contradictory tendencies in its internal organization and its foreign policy. For the last near decade, in fact, Russia has defied modernization theory, in that its democratic institutions have weakened and its people have become considerably more prosperous. Social scientists point to this $10,000 per capita income level at the point generally at which most developing countries become more democratic. But I think it is the oil and gas dependency which has made Russia an outlier in this regard.

In conclusion, while I'm reasonably confident about the broader framework of my argument, there are two important near-term caveats I'd like to make. First, there is the danger that the Kremlin may not be able to react quickly or effectively enough to the growing social and political impact of an extended downturn, especially if there is a second wave of dramatic difficulties later this year or next year.

Now, while one may fault the Russian leadership for being in denial for too long or spending too much of its reserves on defending the ruble, their response has been broadly in line with what other national governments are doing with stimulus packages and other measures -- bailout packages -- and some economic indicators such as the value of the ruble, the Russian stock market have stabilized. Still, there is considerable potential for greater hardship and social unrest that may invite a tougher crackdown in response that could be accompanied by greater international isolation, and this would short- circuit any reset button.

The second caveat concerns differences over our policies towards Russia's near neighbors, which I would expect will continue to be the most contentious point of our relationship. Now, while Russia has been harder hit than many developed and large emerging market economies, many of its neighbors have been hit harder, which may actually be increasing Russia's leverage with them. And I think already we see signs of this in ties with Ukraine and Kyrgyzstan earlier this year.

Tougher economic conditions also may increase Moscow's incentives to control oil and gas production and transport infrastructure with its neighbors. And conflict between Washington and Moscow over the post-Soviet space will likely continue to be the most volatile set of issues in the bilateral relationship as well as within Europe. I think we are unlikely to see consensus in Europe any time soon.

With that, let me conclude so we can leave more time for discussion and questions.

Thank you.

SEN. KERRY: Thank you very much, Mr. Kuchins.

With that, actually, I'm not sure where we are with Russia. Listening to you in the back and forth of these last three testimonies, it kind of leaves a lot up in the air, which is what we're going to try to narrow down.

Now, we have a problem that's developed. The Senate is going to have three votes at 11:00. What I'd ask colleagues to do is if we can stay here till the back end of the first vote, and then we'll have a recess for the period of the second vote, and then we'll vote at the front end of the third vote and come right back. So we'll have a minor recess in order to try to accommodate the process. And I apologize to witnesses for that.

Let me try to jump in very quickly here.

You said at the end of your testimony, Mr. Kuchins, that, you know, Russia is going to have perhaps little ability to contest American power around the world. Isn't that old thinking? I mean is it -- is that really their objective, to contest our power, or is it perhaps to assert their interests as they see them in certain places, which may on occasion contest our power? But it seems to me that's not their fundamental organizing principle, or is it? I'd like to get a sense of that.

You know, countries respond to other countries' actions, and countries make determinations about what their interests are, and make determinations about their perception of a threat to them. The fact is that the Bush administration did a number of things that Russia was pretty much dead set against and stated so before they happened, and we did them anyway.

The independence of Kosovo is an example. I'm not saying it was the wrong thing to do, but in terms of their perceived interest, it certainly clashed. The NATO expansion -- we were pushing like crazy. In the last months we were pushing like crazy to get a couple of countries in that they obviously saw as a major threat to their perceived interest. Abrogated the ABM Treaty unilaterally -- boom, gone -- what does that say? Missile defense -- talked about putting it in, said it's about Iran, but people had questions. I mean, other countries are going to respond, it seems to me, to the things that we do unilaterally. And I wonder to what degree that is perceived by any or all of you as sort of a legitimate perception problem in these relationships and something we need to think about as we go forward.

Mr. Kuchins?

MR. KUCHINS: Thank you very much, Mr. Chairman. It's an excellent question. And I didn't mean to imply in my remarks I saw as a core organizing principle for Russian foreign policy to contest U.S. power around the world.

I think, broadly speaking, for the last couple -- the last nearly 20 years, since the collapse of the Soviet Union, we've had almost sort of very divergent almost psychologies and narratives about our positions in the world and the U.S.-Russian relationship in particular which have made it more complicated for us to have a meeting of the minds. And for the Russians, going through the 1990s through a very difficult time, where their power was at a low ebb, while at that time in the 1990s we are experiencing the so-called unipolar moment and a certain amount of hubris on our part, I think it contributed to a lot of misunderstanding in the relationship.

And it's hard for us to --

SEN. KERRY: Is it not fair to say that our policy could have been perceived as being driven by a significant amount of ideological energy during that period?

MR. KUCHINS: I understand that how from the Russian standpoint how they could perceive that. Let me talk specifically about their views on NATO enlargement and missile defense. Because, again, very fundamentally I see that Russia 's security interests in the long term would be best answered by closer ties with us, given their existing threats in the south of instability, Islamic -- radical Islam and terrorism, et cetera, which we care about, as well as their deep concern about the rising power of China in the East.

And I think for the Russians, when they look at the issues of NATO enlargement and missile defense --

SEN. KERRY: Let me tell you, time-wise, we're not going to be able to chew up. So that everybody gets an opportunity here, we're going to have to try to keep the answers very tight, if we can.

MR. KUCHINS: Yeah. Yes, sir. The point I want to make is that the Russians view these policies, rightly or wrongly, as -- to a considerable extent, as the expansion of a -- sort of the unilateral expansion of a U.S.-led global security system, and they see themselves as excluded.

I think fundamentally they want to be included in the development of a European, Eurasian and broader global security system, and we have to be --

SEN. KERRY: Which speaks against unilateralism, correct?

MR. KUCHINS: Yes.

SEN. KERRY: Mr. Cohen?

MR. COHEN: I think your Russian -- sorry -- I think to answer your question adequately you need to look at what happened after the collapse of the Soviet Union in terms of the transformation of foreign policy elites. And if you compare it to other revolutions, the Russian foreign policy elite remained more or less the Soviet elite -- maybe a little bit younger, maybe with a little bit bigger bank accounts and better watches and clothes, but the outlook, I would call it a quasi-Soviet or neo-Soviet outlook with a good layer of Russian imperialism that views the former Soviet Union, as President Medvedev said on the 31st of August of last year in a national televised addressed, the exclusive sphere of influence of -- the privileged, I'm sorry, the privileged sphere of influence of the Russian Federation. That includes the view of the United States as, as they say openly, the leadership and the military and the security services, as the "principal adversary," quote-unquote.

Yes, this is old think. But this is old think that informs the fundamental decision making that goes into the questions such as how much money to spend on multiple warhead, heavy, intercontinental ballistic missiles, what kind of navy they have to build, how they build the basing policy in the quote-unquote "near abroad" and beyond in the Mediterranean, as I mentioned, et cetera.

So before we examine our foreign policy mistakes -- and I admit, everybody makes foreign policy mistakes -- the Bush administration, and, I'm afraid, in the future, maybe the Obama administration -- we need to look at how much the Russian world view changed. And as the tutor to the heir, the future young czar told the boy, Russia has -- in the 19th century -- Russia has only two allies, the army and the navy. And unfortunately, Mr. Chairman, I'm afraid that that world view still informs a lot of decision making in Russia.

SEN. KERRY: It may well. I'm not going to disagree that -- I mean, we all know where the leadership's roots are. The issue is not -- I mean, I don't disagree that they're informed by that history and by those views and perceptions, and nobody is pretending that there's all of a sudden just because the Soviet Union disappeared a rosiness and a capacity to have a complete, easy relationship in all of these regards.

The issue is how do you find those places, notwithstanding that view, where you have a mutual interest and have the ability to be able to cooperate rather than finding a way to just poke your finger in an eye and find the worst of a situation? And it seems to me that we did a good job of avoiding the ability to find the best and found the worst again and again.

To that end, I want to -- as you answer your question, because my time is up, and I want Senator Lugar -- as you answer that part of the question, I want you to involve in this -- it seems to me we all have a singular, most important unifying principle at this point in time -- or two, if not one. One is, I have heard every major country in the region in the Middle East and surrounding neighbor, from India to Russia, say that is not in the interests of the world or them individually for Iran to have a nuclear weapon or capacity. That's number one.

And number two, the rise of religious radical extremism, fundamental or whatever you want to call it, those are huge interests, and we seem to have left those on the sidelines of these other disputes. And I just want you as you answer it -- and then Senator Lugar, you pick up -- does Russia indeed perceive that as a threat -- this potential -- and do we not have an ability to cooperate there as a starting point to change this relationship?

MR. SESTANOVICH: Senator, I think you're absolutely right that the issue isn't whether we have disagreements. It's whether there is a kind of common purpose that allows the two sides to view those disagreements in a -- as less important and less mutually threatening. I like to refer to the fact that a lot of the disagreements that you talk about -- NATO enlargement and the abrogation of the ABM Treaty -- took place at a time when actually relations were very good. The peak --

SEN. KERRY: Right.

MR. SESTANOVICH: -- the peak of Russian-American relations since the Cold War came in 2002 and 2003, when the Russians had a lot of things to complain about in our policy. But actually relations were very positive because there was a kind of strategic convergence between the two sides.

We may find -- we are certain to find that we won't be able to deal with all of our disagreements. But can we identify, and do the Russians in particular see a common purpose that makes it less grating and less disruptive of the overall relationship?

One can identify a number of common purposes today. You've talked about Iran. The international economic crisis is something that is very much on the Russians' mind as a reason to expand cooperation. How those will play out, you know, depends a little bit on diplomacy. But I completely accept your premise that the way to restructure the relationship is through identifying some common interests that we can act on, not necessarily on backing away from our position on areas where we disagree. We may simply have to disagree.

SEN. KERRY: Senator Lugar?

SEN. LUGAR: Just following on the chairman's questions, given the thoughts that you've -- at least generally you've talked about in terms of domestic Russian governance, it would appear that the downturn in the economy has put some stresses on what we always saw was sort of an implicit bargain between President -- now Prime Minister Putin and the general public, namely that a certain degree of civil rights suspension or difficulties with a lack of democracy and so forth were acceptable to the Russian public so long as there was security moving on with prosperity and a general good feeling that many people in Russia feel they've not had before.

And of course the dilemma for the current administration -- whether it's the current president or the current prime minister -- is that the downturn not so much of the stock market, which affects some wealthy persons, but the ruble, which affects many Russians and reminds people of '98 and other crashes when the middle class was wiped out, gives a great deal of pause. And they've been going on national television in Russia to try to express the desire to holding within 25 percent decline, and maybe they'll succeed or not.

I mention this because this seems to me to make the thought of a strategic partnership, which is often expressed as our goal, or engagement, or what have you, extremely difficult. The current regime may have stress if the world crisis continues for a period of time simply hanging on, without taking very tough measures to repress the public. Now, beyond that, there might be use by the regime of the so- called near abroad policy or the Russian sphere -- that is, the use once again of a thought of Russian nationalism as a way of trying to suppress domestic difficulty.

So we could lose on both grounds, but those who are optimistic about the strategic partnership situation under these current circumstances I'm not certain have much going for them, which then narrows things down, as all of you have expressed. What are any agenda items that we might talk about?

Arms control has risen, simply because, as expressed in our opening statement, the START regime ends December 5th. Our government is hardly prepared at this point, and we hope to have, as you've suggested, nominees from the State Department -- Rose Gottemoeller coming over hopefully for confirmation soon, and somebody who might form a team -- because time is wasting, and it may not be a lay-down hand coming to an agreement even on a narrow START situation, quite apart from one that's more ambitious. But that's sort of an existential problem in which 90 percent of all the nuclear weapons are still with the Russians and ourselves. And Mr. Lavrov and others have indicated they'd like to work on it.

But beyond that, this is I think going to be pretty rough terrain.

And the question for us will be what happens, for example, if in this expression of nationalism there are further problems in Georgia with the buildup of the bases in Abkhazia, for example? Or, what if a relatively dysfunctional government in Ukraine becomes weaker still, and problems with Crimea begin to arise, and therefore Russian expressions really take on our foreign policy in very strenuous and dangerous ways?

Do any of you see any more optimistic scenario with regard to the domestic scene or the near abroad business that I've talked about?

MR. SESTANOVICH: I do.

SEN. LUGAR: Stephen?

MR. SESTANOVICH: And I wouldn't -- you know, I wouldn't bet a mortgage on it. But I would note that the -- I would note that while there is political tension growing in Russia within the elite about how to deal with this crisis, that so far the results are, broadly speaking, to empower liberals and Western-style policy solutions. Andy mentioned that broadly speaking the Western -- the Russian response to the economic crisis has been like that within the developed world.

This crisis emboldens some people to argue that Russia has lost time in not dealing with corruption. President Medvedev is somebody who has been particularly active on that front, and vocal, and his advisers have emphasized how much Russia is weakened by -- essentially by political continuity. One of them said a couple of weeks ago, "We need a new elite."

So there's ferment, and that is something we ought to keep our eye on, because the question is, is there anything that we can do to encourage greater integration and cooperation? I mentioned the WTO, accession of Russia. I think that even before that -- and I would really urge that the Congress not continue to decouple the -- not continue to couple these together -- lifting the Jackson-Vanik amendment. There is an economic agenda that is very relevant in our relations these days, because the Russians have -- Russian policymakers have said they don't expect energy prices to come back soon. And that means they've got to create a positive environment for foreign investment.

So I think there is a -- there's a narrow path through this crisis that could end up with positive political --

SEN. LUGAR: But what if Russia just takes the WTO business and Jackson-Vanik off the table and says, "Thank you very much," but why is there any change in the predicament after the Russians pocket those two situations?

Mr. Kuchins?

MR. KUCHINS: Let me -- I think it gets to what are the sources in the -- of the credibility and legitimacy of the existing regime, or put it more simply, why is Mr. Putin and Mr. Medvedev, why have they been very popular? And I think it fundamentally has to do with the fact that Mr. Putin's leadership of the Russian Federation has coincided with one of the most prosperous periods --

SEN. LUGAR: Right.

MR. KUCHINS: -- in Russia's thousand-year history. You take away that economic growth and prosperity that millions of Russians have been experiencing, and he would not be nearly so popular. Now, the nationalistic elements, the kind of the -- the looking tough and all of that, and that helps, to some degree, but it's fundamentally the economy which is driving the popularity. There are some interesting studies which bear that out.

And I am absolutely convinced that the guys in the Kremlin and in the White House -- excuse me, the Russian White House -- they are deeply aware of that. They do all kinds of polling and public survey research, and they understand that the fundamental deal -- it's not so much that the regime can restrict, you know, political rights and cut down the opposition, but as long as the economy is good, then the people will be more quiescent. And those -- and that fundamental situation is very, very different today, and I think that really affects the whole spectrum of domestic, economic and political relationships, as well as the drivers behind Russian foreign policy.

SEN. LUGAR: My time is expired.

SEN. KERRY: Let me just -- well, let me just ask one thing. I want to ascertain for colleagues, which colleagues are going to be able to come back? Because if people can't come back, I don't want to detain our witnesses. Are -- is anybody -- you're next, Ben, and you're going to be able to get your questions in. But whether -- you're going to come back, Senator --

SEN. : I'm going to try.

SEN. KERRY: Okay. Do you know? You can't come back. So one -- all right.

Senator Cardin, and maybe you can answer in the course of Senator Cardin.

SEN. BENJAMIN L. CARDIN (D-MD): Thank you, and I'll try to be brief.

I just want to agree with our leaders on this committee about the importance of improving our relationship with Russia. An effective relationship's very important for us on security issues, whether it's Iran or energy.

There are many concerns. A lot of them have been brought out. We have human rights concerns from how they treat their journalists to the right of dissent. And we've talked about the repeal of Jackson- Vanik and PNTR. Let me just point out, we still have lingering concerns. Let me just mention one. The Chabad Lubavitch Community has a legitimate concern about the return of the Schneerson Collections. And when you see parts of the Schneerson Collection show up on the black market, it has an impact on whether we are prepared to permanently repeal Jackson-Vanik.

In regards to security issues, we've talked a little bit about Georgia and NATO. I want to bring up an issue I brought up -- that was brought up in the OSCE. I chair the Helsinki Commission, and we have established direct relationships with Duma members. And I must tell you, there is skepticism by my colleagues in Russia as to the sincerity of our reaching out at this point. Russia has brought forward a new security initiative for Europe which would -- which has been supported, at least encouraged, by France.

So I guess my question to you is whether there is any hope in a security initiative that would include Russia and Europe and which the United States would participate in, not as a substitute to NATO, but as a manner in which we're all at the same table, hopefully changing our focus from the interior threats within Europe to the concerns of the Middle East and other areas where we have I think a more direct interest of concern about security risk, whether these initiatives hold out promise?

MR. COHEN: To address the issue of Mr. Putin's popularity, absolutely he was very popular because of the Russian prosperity, also because he brought the war, the second war in Chechnya, to the ending, but he was also popular because of the increasing control of mass media and electronic media. If President Bush controlled ABC, CBS, NBC and CNN, he would be more popular than his popularity used to be. So you cannot decouple a leader's popularity from the control of the media, especially television.

To the senator's excellent question about European security initiative, this is, in my view, in my reading of the Russian initiative, it's something to keep the United States out. As Lord Ismay said, the emergence of NATO was to keep Germany in -- U.S. in, Germany down and Russia out. This initiative is to get Russia in and U.S. out, and as such I don't think we should support it.

MR. SESTANOVICH: I have a slightly different take on this. I actually think that the concerns that Ariel mentions are entirely appropriate, and for some Russians the goal of this initiative is openly to subordinate NATO. And we don't have any particular interest in that. But do we have an interest and can we manage a process in which we put the Russian initiative on the table and talk about it in a European-wide setting, exploring all of the complexities and insisting on the principles that the Russians will find very difficult to oppose of national sovereignty, independence, respect for human rights, reaffirming the original Helsinki Final Act?

I think this is a process that actually has some potential for us, and I'm not so afraid of the devilish Russian diplomatic cleverness that will in the dead of night lead us to sacrifice NATO for the sake of a new forum in Vienna. We've been through more than one Helsinki round in the past, and we've protected our alliance extremely successfully.

MR. : The --

MR. SESTANOVICH: If I could -- the original Helsinki negotiations were intended by the Russians to subordinate NATO, and they ended up becoming a tool for human rights activists throughout the Soviet bloc.

SEN. CARDIN: I think it's a very valid point. And no one here will weaken our involvement in NATO. And I understand what the Russians' intents might be. But when you look at the direct military threat against America from Europe, it's not in Europe. It's Middle East. And if -- we certainly have our concerns in Europe, and they're not going to be reduced. But I do hope that we can engage and not be worried about an engagement here. I do think it does give us the opportunity to work on an effective relationship with Russia, which we need to improve.

And thank you, Mr. Chairman. I appreciate the opportunity.

SEN. KERRY: Thank you very much, Senator, and thank you for your work, incidentally, on the Helsinki Commission.

SEN. EDWARD E. KAUFMAN (D-DE): Mr. Chairman, can I --

SEN. KERRY: Senator Kaufman?

SEN. KAUFMAN: -- I just have a real short question, a follow-up on Senator Lugar's question. It all sounds very organized. We're going to have a second -- (inaudible). We're doing the polling data. Everything's going to be just fine. But what are the possibilities that -- and I say this about, like you say, that they're behaving like a developing country -- but that this turns bad for the United States -- in other words, that Putin, because he's got the problems, Medvedev, that they turn on the United States as kind of the problem that's causing this as opposed to us causing the problem? Is that a prospect of that happening, and what do you think the probability of it is?

MR. KUCHINS: It's certainly a possibility. The worst case scenario, to me, in the near to medium term, were to be if, as I suggested in one of my caveats, if the Kremlin found itself really under siege, not able to respond quickly enough, growing social unrest, and there was the crackdown response, greater centralization of power, greater repression, et cetera, et cetera, and then, not too long after that, there might be a spike in the oil price, and suddenly the Russian economy is on much firmer footing, not necessarily because of anything they do to promote, you know, diversification, more sustainable sources. That would be the worst case scenario which the justification for the crackdown would have greater credibility and legitimacy simply because of the flow of oil money. It's a possibility, and we have to be ready for it and consider it.

But, you know, absent that, I think, I mean, just the constraints the Russian face today on longer term economic growth as opposed to 1998, they're far greater, and they really do, I think, push them more towards cooperation, even if it's kicking and screaming.

SEN. KERRY: Yes, quickly. We've got three minutes left in the vote. We have a little grace period. So if you can wrap it up, that'd be helpful.

MR. COHEN: Yeah. We tend to give a lot of credit to President Medvedev, and duly so, because he is the president. However, when you look at who is really running Russia today, these are all Mr. Putin's allies. And there's a lot of anti-Americanism and nationalism. How do I know? When I go to Russia -- I am a Russian speaker -- I flip television channels. And lo and behold I find out from Russian state- run television that the United States funded the Bolshevik Revolution, when it is a consensus in the historic community that it was the German General Staff that provided money and the sealed carriage for Lenin.

When I'm looking at who the Russian allies emerge over the last three or four years, I'm looking at Chavez, I'm looking at Iran, we're looking at OPEC. Now Russia is in a very intense dialogue with OPEC and the world view of a multipolar world -- translate, less and less American power. I am not saying that the economic crisis will bring it about. But the tendency was there when the prices were high. The question is, what is the perceived national interest? What we consider rational, do they consider the same thing rational, question mark? And I'll leave it at that.

SEN. KERRY: Well, it's very provocative and helpful and important, and it's an important dialogue. And we unfortunately have not been able to complete it. And I regret.

The schedule, because of the votes now and the number of senators coming back, what we're going to do is adjourn rather than recess. But we're going to leave the record open. A number of colleagues have said they want to submit questions for the record, which I'd like to do.

This will not be our only hearing with respect to this question, so we will pursue further, and we might even engage you folks in a roundtable that we want to have on this topic at some point in the near term, because we put a number of very important thoughts out there which really need to be developed a little more.

So nevertheless we did cover a lot of territory, and I think we began to lay the predicate. So we're grateful to you for being here to help us do that today.

And we'll stand adjourned with the record staying open for a week. Thank you.